Of the many variables affecting the pace of the housing market, the most influential is SUPPLY and DEMAND. Sales trends directly reflect the local supply and local demand, creating a forever swinging pendulum of fluctuating housing prices. Figure 1 is an excellent visual of a real estate market cycle and is organized into four general phases. The graph further outlines the impact on home prices in each of the four phases.
Figure 1: Real Estate Market Cycle
Referencing the figure above, Portland experienced an extended Phase 2 – Expansion period from 2013 through 2016. During this time, Portland homes were selling like hotcakes and prices quickly appreciated. This phase was fueled by the Metro Area’s low housing supply and population growth. This is where we saw home appreciation upwards of 5-10% annually in many areas.
So… Where are we now?
Today, we are in Phase 3 – Hypersupply. Demand definitely still exists in Portland, but it has become increasingly weaker. We are still seeing property value appreciation within lower price ranges, but at a much slower rate. A more significant impact is being felt for properties in the mid to upper price ranges. Economic factors that are driving this change include a slower pace of local job growth, wages and incoming population. Additionally, there is a significant increase in new construction, which is growing the housing supply in areas where the Urban Growth Boundary has been expanded.
This phase can be considered a transitional period where a seller’s market slowly makes the shift into a buyer’s market. At this point, the change is becoming evident by fewer homes selling in 2019 compared to prior years, the number of days on market increasing and price reductions are consistently occurring. The statistical averages lag behind the changes in supply and demand, yet they will soon be reporting what is being felt in today’s local market.
It is important to note that in the phase of hypersupply, the pendulum of home prices is very vulnerable. The cycle can move forward or be reversed based upon market dynamics, making this a confusing time for both buyers and sellers. The best way to navigate this phase is to work with a local Realtor with expertise in your neighborhood. Now more than ever, the success of a home sale will be dependent on your Realtor’s knowledge and ability to translate the specific market conditions of your area.
If you, a family member or friend have any questions regarding Portland real estate and your specific neighborhood, we would be honored to assist you. If your real estate interests lie outside of Portland, we can absolutely point you in the direction of a local expert in that area. Let us help you determine how today’s real estate market impacts your future plans to buy or sell. We value the opportunity to be your trusted real estate advisor.
Next segment, Wed 10/16: Hot Topic – Interest Rates – Will the Low Rates Hold in 2020?